Summary: as our ruling elites use the financial crisis to gather economic and political power, the next step is the granting of extraordinary powers to our Executives. Following historical precedent, these will follow the usual forms while greatly changing the substance.
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A historical precedent
Hot excerpts from the Paulson proposal
Can Congress except Executive actions from Court review?
Some experts explain if this is legal
1. Historical Precedent
America’s original Founders borrowed extensively from practices of the Roman Republic. So do today’s Founders of the new American regime when expanding the government’s power. From Wikipedia (slightly edited):
Dictator was a political office of the Roman Republic. Appointed in a time of crisis, the dictator was above the three branches of government in the constitution of the Roman Republic, as no other body or officer could check his power.
A legal innovation of the Roman Republic, the dictator (Latin for “one who dictates orders”) — officially known as the Magister Populi (”Master of the People”) and the Praetor Maximus (”The supreme Praetor“) — was an extraordinary magistrate whose function was to perform tasks exceeding the authority of any of the ordinary magistrates.
The Roman Senate passed a senatus consultum authorizing the consuls to nominate a dictator, who was the sole exception to the Roman legal principles of collegiality (multiple tenants of the same office) and responsibility (being legally able to be held to answer for actions in office); there could never be more than one dictator at any one time for any reason, and no dictator could ever be held legally responsible for any action during his time in office for any reason.
The reasons which led to the appointment of a dictator required that there should be only one at a time and great power was visited upon them — the imperium magnus, having the ultimate imperium maius(a higher degree of imperium), which was the ability to overrule or remove from office the other curule magistrates upon whom imperium was conferred, including the ability to order their death. The dictators that were appointed for carrying on the business of the state were said to be nominated rei gerundae causa (for the matter to be done), for the “putting down of rebellion”, or ironically in the case of Sulla, as ”Dictator for the making of laws and for the settling of the constitution”.
Of course Secretary of the Treasury Paulson will not become a dictator. The term has little utility, weighted down by a millenium of baggage. Nor does history repeat; it just rhymes. Still, the discretionary scope of power and freedom from judicial review to be granted Paulson are without precedent in American history, even in wartime.
2. The Paulson proposal
Go here to see the full text of the legislative proposal from Treasury Department for authority to buy mortgage-related assets. Here are a few of the choice items. Section 8 is my favorite.
Sec. 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase.-The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.-The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
3. Can Congress except Executive actions from Court review?
Section 8 is an essential and necessary requirement for the role of Magister Populi. To make it legal I believe (having no training in the law) that this clause invokes Article III, Section 2 of The Constitution:
In all Cases affecting Ambassadors, other public Ministers and Consuls, and those in which a State shall be Party, the supreme Court shall have original Jurisdiction. In all the other Cases before mentioned, the supreme Court shall have appellate Jurisdiction, both as to Law and Fact, with such Exceptions, and under such Regulations as the Congress shall make.
4. Update: legal analysis
While presumably accurate, these legals experts are telling us that the Constitutional regime is comatose if not yet terminal. Their analysis reads like a follow-up chapter to my 4 July 2006 post “Forecast: Death of the American Constitution.” Esp disturbing are references to Nazi philosopher Carl Schmitt (again reminding us that in many ways Hitler was just early).
(a) “The Bailout Statute“, by David Zaring, posted at the Conglomerate, 20 September 2008 — Excerpt:
Congress bailed out S&Ls before, and survived constitutional challenge then, I can’t see why it wouldn’t be able to bail out other financial institutions now. So: can it do this? Yes. However:
* Has Treasury been delegated an unconstitutionally broad amount of power?
These powers are broad, and because of a weird clause in the preamble of the statute, not the only things Treasury can do: “The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation” sales, appointments, regulations, etc. It’s that “without limitation” language – suggesting that the powers granted to Treasury are examples, rather than limited authorizations, that might give a nondelegation afficianado a little pause. You know, can Treasury take this new sovereign wealth fund and buy anything it likes? Isn’t that unconstitutionally broad? Maybe so …. but your first presumption is that broad grants of power haven’t been held to be unconstitutionally broad since 1935. I think this easily passes muster.
* And there’s no judicial review.
Courts don’t like these clauses – but particularly in civil or constitutional rights cases (see the Supreme Court and GITMO). And for constitutional questions like non-delegation or commerce clause violations, they’d probably just ignore this clause. But otherwise, for run-of-the-mill review of how Treasury implements this scheme, I can’t see there being a problem keeping the courts out. Heck, judges probably want to be cut out of the supervision of Treasury’s supervision of the economy.
(b) A stream of excellent analysis at The Volokh Conspiracy. Esp note how these bailouts are crafted so that they pretend to conform to existing law.
(c) “A further Schmittian (and constitutional?) moment“, Sandy Levinson, posted at Balkinization, 19 September 2008 – Excerpt:
This is exactly what Carl Schmitt met by an “exceptional” situation that requires legal transgression and perhaps even “dictatorship.” Recall, incidentally, that “Sovereign is he who decides the existence of a state of exception.” Well, it’s easy enough to identify the “sovereign(s)” this past week: Ben Bernanke and Henry Paulson.
(d) Who is this NAZI guy? See “Our Schmittian Administrative Law“, Adrian Vermeule (Harvard Law School), Harvard Law Review, 2009 — Abstract:
Our administrative law contains, built right into its structure, a series of legal black holes and grey holes – domains in which statutes, judicial decisions and institutional practice either explicitly or implicitly exempt the executive from legal constraints. Legal black holes and grey holes are best understood by drawing upon the thought of Carl Schmitt, in particular his account of the relationship between legality and emergencies. In this sense, American administrative law is Schmittian. Moreover, it is inevitably so. Extending legality to eliminate these black and grey holes is impracticable; any aspiration to eliminate the Schmittian elements of our administrative law is utopian.
I think it is time to get angry.
Please share your comments by posting below. Please make them brief (250 words max), civil, and relevant to this post. Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
Treasury Department documents
- Paulson Remarks on Housing GSE Actions
- FHFA Director Lockhart Remarks on Housing GSE Actions
- Fact Sheet: FHFA Conservatorship
- Fact Sheet: Treasury Preferred Stock Purchase Agreement
- Fact Sheet: Treasury MBS Purchase Program
- Fact Sheet: Treasury GSE Credit Facility
- Freddie Mac Warrant to Purchase Common Stock
- Freddie Mac Certificate
- Freddie Mac Senior Preferred Stock Purchase Agreement
- Fannie Mae Warrant to Purchase Common Stock
- Fannie Mae Certificate
- Fannie Mae Senior Preferred Stock Purchase Agreement
- Frequently Asked Questions: Treasury Senior Preferred Stock Purchase Agreement
- OMB Director Nussle Statement on the GSEs Budgetary Status
See this page for a current list of Treasury Department documents.
Posts about the current crisis
Treasury Secretary Paulson leads us across the Rubicon, 9 September 2008
High priority report: a geopolitical sitrep on the financial crisis, 15 September 2008
Say good-bye to the old America. Welcome to our new socialist paradise!, 17 September 2008
Another voice warning about the nationalization of AIG, 18 September 2008
A vital but widely misunderstood aspect of our financial crisis, 18 September 2008
A new sitrep, as we move into phase 3 of the financial crisis, 19 September 2008
Another step away from our Constitutional system, with applause, 19 September 2008
What do we know about the financial crisis? What are the key questions?, 20 September 2008
Slowly a few voices are raised about the pending theft of taxpayer money, 21 September 2008
A few of the most important posts warning about this crisis
A brief note on the US Dollar. Is this like August 1914?, 8 November 2007 — How the current situation is as unstable financially as was Europe geopolitically in early 1914.
The post-WWII geopolitical regime is dying. Chapter One, 21 November 2007 — Why the current geopolitical order is unstable, describing the policy choices that brought us here.
We have been warned. Death of the post-WWII geopolitical regime, Chapter II, 28 November 2007 — A long list of the warnings we have ignored, from individual experts and major financial institutions (links included).
Death of the post-WWII geopolitical regime, III – death by debt, 8 January 2008 – Origins of the long economic expansion from 1982 to 2006; why the down cycle will be so severe.
Geopolitical implications of the current economic downturn, 24 January 2008, – How will this recession end? With re-balancing of the global economy, so that the US goods and services are again competitive. No more trade deficit, and we can pay out debts.
- A happy ending to the current economic recession, 12 February 2008 – The political actions which might end this downturn, and their long-term implications.
- What will America look like after this recession?, 18 March 208 — The recession might change so many things, from the distribution of wealth within the US to the ranking of global powers.
The most important story in this week’s newspapers , 22 May 2008 — How solvent is the US government? They report the facts to us every year.
The World’s biggest mess, 22 August 2008 — A brillant ex pat looks at America from across the ocean.
“The changing balance of global financial power”, by Brad Setser, 22 August 2008
“The Coming US Consumption Bust”, by Nouriel Roubini, 6 September 2008
To see the all posts on this subject, go to the archive for The End of the Post-WWII Geopolitical Regime.
Originally published at Fabius Maximus blog and reproduced here with the author’s permission.